What is the most important thing to consider when choosing a private equity partner?
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Practice, private equity firm need to be aligned
Coming to a decision about selling your practice to private equity and actually completing the sale is a long process.
The first thing you want to do is ensure everyone at your practice is on board. All of your practice partners need to be aligned on what they want out of the decision and with what they want to pursue. It will not work if you have to convince them later. It will just take more time and more money.
You must think about what your objectives are for the practice and find a private equity partner that fits with those goals. These partners can be a huge benefit for smaller practices that do not have financial expertise, whether to invest in new partners or new facilities or plan out market consolidation or mergers and acquisitions.
It is important to choose the right partner because you are going to be with them for the long haul. You have to get to know the individual partners as well as the management style of the firm. If you are coming from a smaller self-run practice, you have to be prepared to not have sole discretion over what equipment you buy or what facility you are going to go into.
You also have to think about where your gaps are as a practice and determine if the firm has the ability and resources to close those gaps, optimize your value and grow as a business. A lot of practices think they are going to bring in a private equity partner to solve all of their operational issues. For the most part, they are going to be focused on growth and acquisitions. They might be able to support you on operations, but you still need good internal resources to make everything run smoothly.
Candace S. Simerson, FASOA, COE, CMPE, is an OSN Practice Management Board Member.
Partnership needs to be a cultural fit
When it comes to money, chances are that offers from different private equity groups are not going to be widely disparate. They may differ somewhat but not to a level that will affect your day-to-day experience as you go forward with your practice. Assuming that those numbers are comparable, what really affects things is culture. Are the priorities the same? Is the breadth of practice the same? Is it going to be completely integrated, or is it going to be separate entities that are just under the same umbrella? What does the employment contract look like?
There are a lot of details that you need to consider. Your private equity partner may have preferences on how much uniformity there is between practices. They may want you to work and interact with similar companies. Finding the right fit is the key element.
When we went through our partnership with private equity more than 3 years ago, our practice was used as a platform to create our organization, Eye Health America. It was reassuring knowing that we would be setting the group’s culture moving forward. However, even in that circumstance, we wanted to be sure that the private equity group had the same vision as we did. We wanted to see the same values, the same attitude toward health care and the same attitude toward future consolidation.
Since joining our private equity group, we still look for that same cultural fit when we partner with other practices. As we create a larger organization, we want to ensure everyone’s vision of ophthalmic health care delivery is in alignment.
Cathleen M. McCabe, MD, is medical director at The Eye Associates in Florida.
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